Tax Consultants: Your Key to Efficient Tax Compliance and Savings

Tax Consultants: An Overview

Tax consultants play a crucial role in helping clients meet their tax obligations by leveraging their extensive knowledge of tax rules and regulations. They ensure compliance with the law while also aiming to minimize their clients’ tax liabilities. In addition to assisting with tax returns, tax consultants provide guidance on various financial matters, including investments. Much of their time is spent either working at their desks on calculations or holding meetings with clients. To simplify the process of preparing and submitting tax returns, they utilize various technologies. Staying updated on the latest developments and changes in tax laws and regulations is essential for their work. This blog will explore the role of tax consultants in detail, covering all aspects of taxation.

What is a Tax Consultant?

A tax consultant is well-versed in the tax laws established by the Income Tax Act of India, which individuals and corporations must adhere to when reporting their taxes. Consulting with a tax consultant can provide essential guidance for accurately filing income taxes. In addition to tax filing, Indian tax consultants offer a range of services, including:

  • Documenting taxes
  • Submitting e-returns
  • Filing taxes for freelancers
  • Assessing a taxpayer’s financial and legal situation to determine their tax obligations
  • Completing and submitting tax forms (e.g., Form 16 and Form 12B) through the income-tax portal
  • Advising on reputable investments such as life insurance, health insurance, pension plans, child plans, and other government-sanctioned tax-saving initiatives.

Benefits of Hiring a Tax Consultant

A knowledgeable tax consultant can provide practical strategies to reduce your tax burden while enhancing your financial situation. For example, hiring a tax consultant may yield substantial tax deductions, ultimately saving you hundreds or even thousands of rupees when filing your tax return.

  • Time-Saving: Many individuals file their taxes at the end of the year, which can lead to rushed and poor investment choices. A tax consultant will review your financial portfolio and verify all your earnings and savings before you file your income tax return. They can also recommend ways to manage your financial portfolio effectively.
  • Stress-Free: Consulting with an expert is advisable, especially regarding finances. A tax consultant can securely and legally store your tax records, relieving you of the stress of navigating complex regulations.
  • Tax Advisory: Even if you choose not to hire a consultant, a tax consultant can provide valuable guidance. You can reach out for updates as needed, or you can take the initiative yourself.

The Need for Tax Consultants

The primary role of a tax consultant is to assist individuals and businesses in fulfilling their tax obligations. They are knowledgeable about tax laws, compliance, and planning. Individuals and business owners can engage a tax consultant to optimize both short-term and long-term tax strategies. They work closely with clients to file tax returns and reduce annual tax liabilities.

Tax Consultants vs. Accountants

Accountants typically oversee a firm’s annual accounts, analyze financial data, file tax returns, participate in tax audits, and provide general tax advice. While they also work to minimize a business’s tax burden and aid in making sound financial decisions, tax consultants have a more specialized focus on tax regulations. Before consulting a tax consultant, ensure they operate a tax advisory firm or have expertise in tax-related matters. They should also hold a practice certificate. Unlike accountants, who have broader responsibilities, tax consultants focus specifically on tax issues and can assist with year-round tax planning.

GST on Consulting Services

Consulting services are subject to an 18% GST charge, encompassing various fields such as medicine, finance, and investments. While there are five other GST slabs (0%, 5%, 12%, 18%, and 28%), consulting services fall solely within the 18% slab. All services previously subject to a service tax of 15% now fall under the 18% GST regime.

ITR for Consultants

The deadline for filing income tax returns is fast approaching, with less than two weeks remaining. The process for filing an Income Tax Return (ITR) differs for consultants and freelancers compared to salaried individuals. Both freelancers and consultants are classified as self-employed for taxation purposes and are responsible for managing their taxes and business-related expenses. Their income is generally reported as business income, allowing them to qualify for specific business deductions. Unlike salaried taxpayers, consultants cannot use ITR-1 or ITR-2 forms and do not qualify for the standard deduction of ₹50,000.

Career as a Tax Consultant

A career as a tax consultant equips you with the skills and knowledge needed for making informed financial decisions. This role is in high demand and often comes with a competitive salary that increases with experience and education. Tax consultants can work independently or for private or public sector organizations, and individuals from non-commerce backgrounds often find opportunities in tax consulting due to its flexibility and career advancement potential.

Qualifications

To become a tax consultant, candidates typically need to meet the following criteria:

  • Successfully complete all levels of the Institute of Chartered Accountants of India (ICAI) courses.
  • Pass all levels of the Institute of Company Secretaries of India (ICSI) curriculum.
  • Be registered with the Bar Council (L.L.B.).
  • Complete all levels of the Institute of Cost and Management Accountants of India (ICMAI) program.
  • Hold a degree in business, banking, or management, along with certification from the Central Board of Direct Taxes (CBDT).

While company secretaries can become tax consultants and file returns on behalf of clients, they are not permitted to conduct audits or represent clients before tax tribunals.

Conclusion

According to Section 194J of the Income Tax Act of 1961, TDS on consultancy fees must be deducted from payments made to residents at a rate of 2% or 10%, as applicable. As outlined, a tax consultant can address various financial issues and guide you in making sound financial and investment decisions. Whether you are an individual or a business owner, engaging a tax consultant can aid in ensuring tax compliance and effective planning.

 

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